But strong performance in development boosts overall European profit

Lendlease’s European construction arm hit margins of just 0.4% in its last financial year, according to results filed by the Australian group last night.

The European construction arm - the bulk of which is made up by UK business - saw margins slide in the 12 months to June this year, having hit a 1.8% margin the previous year.

The division’s operating profit fell 77% to £2.8m, down from £12.2m, on unchanged revenue of £670m.

But a strong performance by its sister development division - where operating profit doubled to £69.8m - meant Lendlease’s European business overall posted a 31% increase in operating profit to £90.2m, up from £68.6m.

Lendlease is developing two of London’s largest mixed-use schemes - the residential-led regeneration of Elephant & Castle (pictured), south London, and the International Quarter commercial district in Stratford to the east.

Neil Martin, managing director of construction for Europe, said: “We’ve been selected for some fantastic contracts this year, including the prestigious Copperas Hill building at Liverpool John Moores University and a major refurbishment of White City Place in West London.

“The underlying business has performed well and has a healthy outlook reflected in the quality of our pipeline.”

The overall group enjoyed a strong year, including good trading in its native Australian market, helping boost pre-tax profit by 12% to A$863m (£500m).